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Wall Street Thrives On Fees; Here's How To Protect Your Portfolio

Summary

In this post, we discuss our relentless pursuit of absolute return of both capital and dividends with minimal fees and trading commissions.

Members of Main Street Value Investor in the Seeking Alpha Marketplace received an advanced reader copy of this post before its public release.

Listen to the audible version of this post in the Main Street Value Investor Podcast (scroll to the bottom of the article).

At Main Street Value Investor (MSVI), we think self-directed investing is simple, if not easy; doable, if not intimidating. We know from experience that uncomplicated, focused research conducted in a thoughtful, disciplined manner can outperform Mr. Market over an extended holding period, more often than not.

We advocate several principles of profitable self-directed investing that we have found when consistently implemented can produce market-beating portfolios over an extended period.

In this post, we share our relentless pursuit of the absolute return of both capital and dividends with minimal fees and commissions.

Protect Your Portfolio from the Wall Street Fee Machine

To be sure, Wall Street institutions will always outperform the Main Street investor in overall investment-related income due to their knack for punishing clients with enormous churns of fees and commissions.

As contrarians of the Wall Street Way, the mantra of the new value investor of Main Street is the absolute return of both capital and dividends with minimal fees and trading commissions.

We will never pay more than one percent of invested assets annualized in discount brokerage trading and fund fees, combined. It is just not necessary to pay more. We will likely incur significantly less than one-half of one percent in annualized fees and commissions on our investments.

Considering other, often overlooked costs, such as 401K, IRA, and 529 plan fees; inflation; income taxes on dividends and capital gains; and the technology used to research and trade those investments, keeping up-front fees and commissions closer to 0.25% becomes paramount to a low-cost portfolio.

Furthermore, we do not invest our hard earned dollars in any speculative, often high-cost investments such as commodities, high yield or distressed debt, currencies, or abstract derivatives enjoyed by the Type A personality Wall Street traders and speculators.

Also avoided are complicated, risky investment vehicles such as options or short selling. Perhaps we are entertained by observing such exhilarating and speculative activity, but only from the sidelines.

The bottom line in keeping portfolio costs reasonable also involves picking cost-effective investment vehicles such as dividend-paying common stocks, low-cost exchange-traded funds; plus FDIC-insured cash instruments to store dry powder from contributions, capital gains, and dividends.

Be cautioned that some funds and brokers are charging inexcusable fees for money markets and sweep funds as well. The Hampton beach house churn comes from virtually all investment categories.

Just like any business, work diligently as an investor to keep your costs as low as possible to make controllable contributions to your portfolio's bottom line.

Beating the Market with Common Sense Portfolios

In his subscriber-supported investment service, award-winning editor David J. Waldron uncovers mispriced or reasonably-priced stocks with wide margins of safety for compounding returns through all market cycles.

Here are the cumulative weighted performances of Main Street Value Investor's two model portfolios as of the quarter ending September 30, 2018 (since inception date, net of dividends):

Large-Cap Total Return (inception July 2008): +132.84% vs. +63.31% for the S&P 500.

Small-Cap Total Return (inception October 2017): +11.73% vs. +7.77% for the Russell 2000.

Methodology: For a more balanced view of the performances of each equity holding, the MSVI model portfolios are market cap weighted against their respective benchmarks based on the dates of our initial stock purchase or the original publication of our research. The overall results of each portfolio are derived from the cumulative market cap weighting of each common stock holding. Naturally, past performance is not a barometer of future returns.

Each portfolio consists of 20 common stock holdings with no duplication. These diverse ideas are available exclusively to subscribers of Main Street Value Investor in the Seeking Alpha Marketplace. Become a member, today, and take advantage of the low-cost, high-value annual subscription.

Learn more about MSVI and also take advantage of the 30-day money-back guarantee available on new annual subscriptions from Seeking Alpha. Try us today!

Main Street Value Investor Podcast

We are pleased to provide audio versions of our posts via the Main Street Value Investor Podcast to interested members and followers of MSVI. 

The podcast is also available in the iTunes Store (free):

"Wall Street Thrives On Fees; Here's How To Protect Your Portfolio" from Main Street Value Investor by David J. Waldron on Apple Podcasts

Main Street Value Investor Mission

The mission of Main Street Value Investor is to facilitate an interactive, private community of thoughtful, disciplined, and patient everyday investors that are passionate about learning, practicing, and sharing the art and science of building wealth from the magic of compounding protected by a wide margin of safety.

Learn more about MSVI and take advantage of the 30-day money-back guarantee available on new annual subscriptions from Seeking Alpha. Try us today!

Finding value with a wide margin of safety. Building wealth from the magic of compounding.

Copyright 2018 by David J. Waldron. All rights reserved worldwide. Copying or disseminating is strictly prohibited by law.

Main Street Value Investor is a trademark, and the Main Street Value Investor model portfolios, MSVI acronym, and tree logo are service marks of David J. Waldron.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Service is for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs or intended for portfolio construction beyond the author's model portfolios which are presented solely for educational purposes. David J. Waldron is an individual investor, writer, and editor, not an investment adviser. Subscribers should always engage in his or her own research and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.